The new European Union initiative – Growth Plan for the Western Balkans, was announced for the first time by the President of the European Commission Ursula von der Leyen on 31 May 2023 during the GLOBSEC 2023 Forum in Bratislava. It was officially adopted on 8th November 2023 within the 2023 Enlargement Package.
The goal of the initiative is to use the economic potential of the region and to provide room for an intensified inter-regional economic cooperation and trade in the short- and medium run.
The Plan is based on four pillars which aim at:
- Enhancing economic integration with the European Union’s single market (alignment with the single market rules);
- Boosting economic integration within the Western Balkans through Common Regional Market based on EU rules and standards;
- Accelerating fundamental reforms
- Increasing financial assistance to support the reforms through a Reform and Growth Facility for the Western Balkans, worth 6 billion euros in grants and loans, conditioned on fulfilling the fundamental reforms from the pillar above.
To achieve ambitious goals defined in these pillars of the Plan, an appropriate regulation has been adopted, envisaging the new EU Reform and Growth Facility.
The value of the EU Reform and Growth Facility for the entire Western Balkans is 6 billion euros for the period 2024-2027. The regulation defines that the package of financial support includes a combination of 2 billion euros in EU grants and 4 billion euros in favourable loans.
According to the defined methodology, the amount determined for Montenegro is roughly 383 million euros – the combination of about 255 million euros of favourable loans and 128 million euros of EU grants.
The plan is that, out of the total amount of support, a half, i.e. about 190 million euros, will be allocated in form of a direct budget support, while the other half of the funds will be allocated for financing infrastructural projects and they will be implemented through the mechanism of the Western Balkan Investment Framework (WBIF). According to the announcements of the European Commission, the plan is to allocate 7% of the total amount at the beginning of the Growth Plan implementation, while the rest is to be allocated in six semi-annual tranches of support that will depend on the level of implementation of the planned reforms.
Reform Agenda
To meet the requirement for allocation of funds within the third pillar of the Growth Plan, Montenegro and other beneficiaries of the support in the region are expected to align their reform plans with the EU, i.e. to prepare and adopt a document titled Reform Agenda for the EU Reform and Growth Facility. This document should contain a list of reform measures with detailed activities and indicators.
The goal of the Reform Agenda is to use the European Union incentives available through the Reform and Growth Facility for the Western Balkans to implement key reforms in the areas of strategic importance for accelerating the economic growth.
In this context, the Government of Montenegro, together with the EC, identified the areas of strategic importance that should be included in the Reform Agenda through appropriate reform measures: (1) business environment and development of the private sector, (2) digital and energy/green transition, (3) development of human capital and (4) rule of law/fundamental rights.
4 goals of the thematic policies
- Business environment and development of private sector
- Human capital development
- Digital and energy/green transition
- Rule of law/fundamental rights
After the initial consultations with the European Commission services, in its meetings on 5th and 7th December 2023, the Government adopted the first, and then the second draft, that contained an overview of the reform measures, submitted to the European Commission.
The first draft of the Reform Agenda provides a list of reforms in the field of business environment and development of the private sector, digital and energy/green transition and development of human capital, while in the second draft the list of reforms is extended to include the reforms in the field of the rule of law (democracy, judiciary, combating corruption, fundamental rights and freedom of the media, combating organized crime, visa policy).
With a view to ensuring more efficient and purposeful work on the preparation of the Reform Agenda, a working team for preparation of the Reform Agenda for the EU Reform and Growth Facility was established in late January 2024. Its work is coordinated by the Ministry of European Affairs.
In line with the deadlines set and templates defined by the European Commission, the Working Team used the several steps defined in the EU methodology and submitted to the European Commission the improved drafts of the proposal of the basic reform measures and steps for their implementation. Proposal of this document was agreed on the technical level on 19 June 2024, after which it was prepared for discussion in the Government.
According to the methodological approach of the EU, the first step in composing the full format of the Reform Agenda is to agree on the proposal of the basic reform measures and steps for their implementation. The reform measures agreed on in this way serve only as the basis to prepare the document in its full format, in line with the template provided by the European Commission. It should contain a narrative part with a detailed description of the situation and plans for each of the reform measures, as well as a description of the situation in the policy areas and areas that are defined as general preconditions for allocation of the EU funds.
The Final Proposal of the reform measures and steps for the Reform Agenda for the EU Reform and Growth Facility contains 32 indicative priority reform measures within four policy areas, 14 policy sub-areas (sectors) and steps defined as necessary for implementation of reforms. The defined steps also contain performance indicators that will constitute the basis for monitoring progress in the implementation of the reform measures and assessment of the EU on whether the conditions for allocation of funds are met.
The process of aligning the proposed document with the suggestions of the European Commission is in progress.
Why is the Reform Agenda important?
It is important to mention that, designing the Reform Agenda, as the document that contains an overview of the reforms that the state has to implement, the European Commission also modified the methodology of the Economic Reforms Programme (ERP), that is prepared by the countries in the process of dialogue about economic governance. Thus, the chapter on structural reforms will no longer be a part of ERP, but a part of the Reform Agenda, while ERP will remain only a macro-fiscal document.
The Reform Agenda contains a set of reforms that have already been recognized as important for achieving the benchmarks and criteria needed for membership. This new format is trying to give an additional impetus to their implementation. This is even more true since the financial support is conditioned by the implementation of the activities envisaged in the reform measures. In such a way, an additional responsibility is imposed on the decision makers and administration, to show a real level of commitment and efficiency in leading the reform process and implementing the reforms.
We should have in mind that the process of preparing the documents and implementing the measures comes with abundant documentation and, in that respect, it is demanding for the state authorities that participate in it.
After the formal adoption and submitting the document to the European Commission, two contracts will be signed – one regulating the processes and procedures of cooperation between two parties, and the other regulating the conditions of financing.
After this, a particularly important segment is monitoring and reporting about the implemented reforms. It should result in the semi-annual financial support.
By Bojana BOŠKOVIĆ, State Secretary in the Ministry of Finance and Negotiator for the Cluster III – Competitiveness and Inclusive Growth